HD Hyundai Heavy Industries posted first-quarter results that beat market expectations this year. Although working days fell due to seasonal factors, sales of high-margin eco-friendly ships increased and profitability in the offshore institutional sector improved, pushing operating profit to more than double from a year earlier.
HD Hyundai Heavy Industries said on the 7th that on a consolidation basis for the first quarter it posted sales of 5.9163 trillion won and operating profit of 905.4 billion won. Compared with a year earlier, sales rose 54.8% and operating profit rose 108.8%. Sales were in line with the securities consensus, and operating profit exceeded the consensus by 13.6%. The operating margin was 15.3%, up 4 percentage points from 11.3% in the first quarter of last year.
The expansion in scale reflected the effects of the merger with HD Hyundai Mipo completed on Dec. 1 last year. In the first quarter of this year, the performance of the former HD Hyundai Mipo's mid-sized ship division was included for a full quarter for the first time. Before the merger, HD Hyundai Heavy Industries posted first-quarter sales of 3.8225 trillion won and operating profit of 433.7 billion won last year.
Profitability improved largely because more sales from higher-priced ships were recognized. There is a lag between order, construction, and revenue recognition for ships, and volumes secured at higher prices since 2023 have begun to be reflected in earnings in earnest. Conversely, as the share of past orders placed at lower prices decreased, the company was able to earn higher profit on the same level of sales.
The offshore institutional sector also helped improve results. While offshore plants had acted as a factor increasing earnings volatility for shipbuilders when process delays or expense burdens arose, in this quarter higher progress rates in key projects and the effects of expense management fed through to improved profitability.
The outlook for this year's results is also positive. The securities market expects HD Hyundai Heavy Industries to post sales in the mid-23 trillion won to 26 trillion won range and operating profit in the mid-3 trillion won to 4 trillion won range this year. With the merger effects being fully reflected and the share of sales from higher-priced ships increasing, observers see profit stepping up a notch from last year.
The order environment is favorable as well. Orders for high value-added ships such as LNG carriers, LPG carriers, and tankers continue, while U.S.-driven LNG projects and growing global energy transport demand are boosting expectations for additional orders. The ship engine business is also emerging as a mid- to long-term growth driver as demand expands beyond marine engines to power generation for data centers.